Economic growth and tax structure in Zimbabwe: 1984-2009.

Abstract

We examine the tax-growth nexus in Zimbabwe using parametric and non-parametric analysis. We use a two-stage estimation procedure that first generates efficiency scores for the country using a Data Envelopment Approach. We use the efficiency scores in the second stage to normalise growth to get a proxy for potential economic growth. Using this potential growth we run a translog model that allows computation of time-varying elasticities of growth to changes in tax policy. The translog model results we got indicate that economic growth is inelastic to tax structure in Zimbabwe. As such, we recommend policies that rely on non-tax stimuli to the economy to buttress growth. We find that the most inefficient years were those punctuated with bad economic governance and droughts.